Investment advisers, research analysts allowed to charge advance fees for year

In a major boost to investment advisers (IAs) and research analysts (RAs), the capital markets regulator Sebi board on Monday allowed them to charge advance fees for up to one year.

As per the existing rules, IAs can charge fees in advance for up to two quarters if agreed upon by the client, while RAs were allowed only for a quarter.

“IAs and RAs regulations were earlier rationalised to address many concerns of the industry. Most of the changes have been welcomed by them,” Sebi said, while maintaining that concerns remained on some of the fee-related provisions which restricted collection of advanced fees by IAs/ RAs to six months or three months’ fee.

Sharing details, Sebi Chairman Tuhin Kanta Pandey said in order to address those concerns, the board has decided that if agreed by the client, IAs and RAs may charge fees in advance up to a period of one year. Earlier, IAs and RAs were allowed to charge advance fees for a maximum period of two quarters and one quarter respectively.

Clarifying that the compliance requirements related to fee limits, payment modes, refunds, and breakage fees will only be applicable to individual and Hindu Undivided Family (HUF) clients, he said in case of non-individual clients, accredited investors, and in case of institutional investors seeking recommendation of proxy adviser, fee related terms and conditions will be governed through bilaterally negotiated contractual terms.

To protect investors from being locked into long-term payments for services they may not find satisfactory, Sebi had initially introduced limits on advance fees.